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Gold-market rigging has many whistleblowers; they're just always ignored

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Published : January 23rd, 2012
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Many people ask why, if there really is a gold price suppression scheme -- a scheme of currency market intervention to support the dollar and other currencies against the true international reserve currency, gold -- some whistleblowers haven't come forward to expose it.


In fact, the whistle has been blown on the gold price suppression scheme many times over the years, and by the highest authorities. They just haven't yet been recognized as whistleblowers by the news media and financial analysts.


Many of you may have heard of Federal Reserve Chairman Alan Greenspan's famous remark about gold in his testimony to Congress in July 1998: "Central banks stand ready to lease gold in increasing quantities should the price rise."


That is, Greenspan contradicted the usual central bank explanation for leasing gold -- supposedly to earn a little interest on a dead asset -- and admitted that gold leasing is all about suppressing the price. Greenspan's admission is still posted at the Fed's Internet site:


http://www.federalreserve.gov/boarddocs/testimony/1998/19980724.htm


And at GATA's:


http://www.gata.org/files/GreenspanTestimony-07-24-1998.htm_.txt


But the official whistleblowing goes far beyond that.


A few years ago a sensational memorandum was discovered in the archives of William McChesney Martin, the longest-serving chairman of the Fed, from 1951 to 1970. His archives are in the possession of the Missouri Historical Society and material from them is posted on the Internet site of the Federal Reserve Bank of St. Louis.


The sensational memorandum is dated April 5, 1961, and is titled "U.S. Foreign Exchange Operations: Needs and Methods." It is a detailed plan of surreptitious intervention by the U.S. government to rig the currency and gold markets to support the dollar and to conceal, obscure, or even falsify U.S. government records and reports so that the rigging might not be discovered.


We don't know if the plan was ever fully implemented but the memo proves that at least such surreptitious market rigging was contemplated by the U.S. government in the greatest detail:


http://www.gata.org/node/7096


Paul Volcker was the U.S. Treasury Department's undersecretary for international monetary affairs from 1969 to 1974 and became Fed chairman in 1979. He lately has been an adviser to President Obama. Volcker has written some memoirs that as far as we can tell have been published only in excerpts by The Nikkei Weekly in Japan.


On November 15, 2004, The Nikkei Weekly published the following excerpt from Volcker's memiors about the U.S. dollar revaluation that took place on February 12, 1973. Volcker writes:


"That day the United States announced that the dollar would be devalued by 10 percent. By switching the yen to a floating exchange rate, the Japanese currency appreciated, and a sufficient realignment in exchange rates was realized. Joint intervention in gold sales to prevent a steep rise in the price of gold, however, was not undertaken. That was a mistake."


http://www.gata.org/node/8209


Got that? A former Federal Reserve chairman, the one credited for wringing inflation out of the U.S. dollar in the late 1970s and early 1980s, now a presidential adviser, says that for the U.S. government not to rig the gold market was a mistake.


Volcker is still around to answer questions, but as far as we know, no financial journalist has ever asked him why not rigging the gold market was a mistake.


Arthur Burns was Fed chairman from 1970 to 1978. On June 3, 1975, Burns wrote a letter to President Ford about surreptitious efforts by the Fed to suppress the gold price. This letter is available from various sources of declassified U.S. government records and is posted at GATA's Internet site:


http://www.gata.org/files/FedArthurBurnsOnGold-6-03-1975.pdf


Burns told the president: "I have a secret understanding in writing with the Bundesbank, concurred in by Mr. Schmidt" -- that's Helmut Schmidt, West Germany's chancellor at the time -- "that Germany will not buy gold, either from the market or from another government, at a price above the official price of $42.22 per ounce."


Burns added, "I am convinced that by far the best position for us to take at this time is to resist arrangements that provide wide latitude for central banks and governments to purchase gold at a market-related price."


That is, the chairman of the Fed in 1975, four years after the dollar was disconnected from any formal convertibility into gold, told the president that the U.S. government should discourage market pricing of gold.


A few weeks ago the German freelance journalist Lars Schall contacted Schmidt's office about the Burns letter. Schmidt replied through a secretary that he could not remember the secret understanding the letter described, but he did not deny it.


The whistleblowing about gold price suppression by former Fed Chairmen Greenspan, Martin, Volcker, and Burns may seem a bit like history. But there was similar whistleblowing two years ago.


Evaluating GATA's freedom-of-information request for access to the Fed's gold documents, a member of the Fed's Board of Governors, Kevin M. Warsh, replied to GATA's lawyer in September 2009 that among the gold records the Fed insisted on keeping secret were records of the Fed's gold swap arrangements with foreign banks:


http://www.gata.org/files/GATAFedResponse-09-17-2009.pdf


Of course the only purpose of gold swap arrangements is market intervention.


Fed Governor Warsh did not write that those gold swap arrangements had actually been implemented. But our German freelance journalist friend Schall and others have gotten the Bundesbank to make statements that come close to confirming that the Bundesbank has undertaken gold swaps with the United States to pursue what the Bundesbank calls its "strategic" activities in the market:


http://www.gata.org/node/9363


And just last month Warsh, having resigned from the Fed's board, wrote an essay in The Wall Street Journal about the increasingly popular topic of "financial repression" -- that is, government intervention against markets. Warsh wrote that "policy makers are finding it tempting to pursue 'financial repression' -- suppressing market prices that they don't like":


http://www.gata.org/node/10839


A few weeks later a columnist for the Financial Times cited Warsh's commentary in her own column in the FT:


http://www.gata.org/node/10828


But neither she nor anyone else, as far as GATA has been able to determine, went back to Warsh to ask the obvious and compelling questions:


-- Which policy makers are trying to suppress market prices?


-- Which prices are they trying to suppress?


-- Exactly how do you know about these efforts to suppress certain prices? Do you know from the experience of your five years as a member of the Fed's Board of Governors?


-- In a democratic country do the public and the markets have the right to know plainly and specifically the public policy of "financial repression" here, so they might understand which markets are being targeted, which markets really aren't markets anymore at all?


Since the news media and financial writers do not seem inclined to ask Warsh the obvious and compelling questions raised by his essay, GATA sought to do so. We reached Warsh through the Hoover Institution at Stanford University in California, where he has become a visiting fellow, and asked if we could interview him about his essay in the Wall Street Journal about "financial repression." Warsh was slow to respond but he did respond after a couple of weeks, very cordially and apologizing for the delay.


While not answering the request for an interview, Warsh replied that this coming Thursday at Stanford he plans to make his first public comments since leaving the Fed, that these comments will elaborate on "financial repression," and that the university will make his comments widely available. Warsh even had a university publicist contact me so that I would have quick access to his comments. They may be of the greatest interest to advocates of free markets and democracy.


Will Warsh's comments be of any interest to the financial news media? I wouldn't count on it. But I mention these incidents of whistleblowing about the gold market, all of which are described in the "Documentation" section at GATA's Internet site -- http://www.gata.org/taxonomy/term/21 -- just to show that the question isn't why isn't there any whistleblowing in the gold market but rather why it isn't reported.

 

 

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